The pilot program for long-term investment reform of insurance funds is gaining momentum. According to an exclusive report by Caixin, the National Financial Supervision and Administration Commission has recently approved New China Life Insurance’s participation in the third batch of long-term investment reform pilot projects for insurance funds. New China Life Insurance plans to jointly initiate the third phase of the Honghu Fund with relevant institutions, and received final approval on May 13th. This marks the successful establishment of three phases of the Honghu Fund by New China Life Insurance.
More Incremental Funds Expected
Several insurance institutions, including China Post Insurance Asset, are actively seeking qualifications for the third phase of the long-term investment pilot program. So far, China Life Asset Management and New China Life Insurance have been approved. Industry insiders revealed that Phase II of the Honghu Fund also plans to enter the market soon, focusing on investing in high-quality listed companies with large market capitalization, good liquidity, and high market influence.
Purpose of the Pilot Program
Chen Hui, Director of the China Actuarial Science and Technology Laboratory at Central University of Finance and Economics, told Caixin that the main purpose of supporting qualified insurance institutions to set up new private securities investment funds is to explore new models for the utilization of insurance funds and guide them to become “patient capital.” The investment principles of these funds include asset selection, diversified investment, and long-termism, using long-term strategies to counter uncertainty. Chen Hui also highlighted that these funds have developed good global asset allocation strategies, such as the Merrill Lynch Clock, Yale Fund, and Bridgewater Fund strategies, which are beneficial for promoting innovation in the capital market and enhancing its value discovery function.
Supporting Technological Innovation
The Financial Regulatory Authority also supports qualified insurance institutions in setting up new private equity investment funds. The primary goal is to guide insurance funds to promote the development of technology finance, achieve a virtuous cycle of “technology – industry – finance,” and fully leverage the financial power of technology finance in supporting technological innovation.
Background of the Pilot Program
The pilot program for long-term investment reform of insurance funds began in 2023. In October 2023, the State Financial Regulatory Commission approved China Life Insurance and New China Life Insurance to pilot the establishment of a securities investment fund through raising insurance funds, with a scale of 50 billion yuan, aimed at long-term investment in the stock market.
In March 2024, the Honghu Fund, initiated by China Life Insurance and New China Life Insurance, officially began its investment operations. By early March 2025, Phase I of the Honghu Fund was successfully launched, focusing on strategic emerging industries such as new energy, biomedicine, and high-end equipment manufacturing, achieving good performance with lower risks and higher returns than the benchmark.
Institutional Innovations and Expansions
In terms of institutional innovation, insurance institutions can participate in the establishment of private securities investment funds through both the limited partnership fund model and the contractual fund model. The limited partnership fund model consists of general partners (GP) and limited partners (LP), with GPs responsible for fund management and decision-making, and LPs providing financial support. The contractual fund model involves investors entrusting their funds to a fund manager, with rights and obligations clarified through a trust contract with the custodian bank.
In terms of institutional expansion, in addition to the first batch of pilot companies (China Life Insurance and New China Life Insurance), six new insurance companies were added in the second batch, including CPIC Life Insurance, Taikang Life Insurance, Sunshine Life Insurance, PICC Life Insurance, Ping An Life Insurance, and Taiping Life Insurance.
Total Scale of Long-term Investment Pilot Programs
So far, the State Financial Regulatory Commission has approved two batches of long-term investment reform pilot programs for insurance funds, totaling 162 billion yuan. With the recent approval of the third batch worth 60 billion yuan, the total scale of long-term stock investment pilot programs may reach 222 billion yuan.
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